In the aggregation-integration construct, more values accrue to the entity that controls demand, not supply, since supply is largely unbounded and unconstrained. For example, the number of news sources (i.e. the suppliers) is large while the entities that host users and control their experiences like Twitter, Facebook, and Google (i.e. the aggregators) are limited. These aggregators accumulate most gains and also hold more power over the suppliers of news like newspapers.
The founding members of Facebook Libra which include Stripe, Visa, MasterCard, and Naspers will be suppliers. Facebook will be the only aggregator in the network and will enjoy the largest benefit in the Libra system. Why? Among all of them, Facebook is the only entity that actually has most control of the users through the Calibra, the Libra wallet.
Facebook Libra’s major competitor will be the credit card it will work to replace in the developed world. In developing world like Africa, the Libra competitor will be cash. I am close to saying that the friction on cash is higher, and Facebook could get traction if it works with networks of local agents across territories and domains. Replacing credit cards in places like America? I am not really sure about that. But who knows! WeChat has a different paradigm: attack cash since China was never a credit card nation to start with.
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Nonetheless, Facebook Libra has a real chance of winning the peer to peer payment sector, challenging MoneyGram, Western Union and intra-nation platforms like Venmo.
So, the challenges for Libra are to win over credit card users in the developed world and make fans out of cash users in the developing world. Because it has WhatsApp and Messenger, I will vote for the win in the developing world. Fixing the cash challenges will be bringing the underbanked or unbanked into the fold through a global scale of financial inclusion. Possibly, with the help of Libra, the Central Bank of Nigeria will hit its financial inclusion target.
Put succinctly, our priorities at the CBN over the next five years are the following; First, preserve domestic macroeconomic and financial stability; Second, foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians thereby raising the financial inclusion rate in the country; Third, continue to work with the Deposit Money Banks to improve access to credit for not only small holder farmers and MSMEs but also consumer credit and mortgage facilities for bank customers.
We will be waiting how they will create that Libra initial money. If Facebook decides to give limited people equivalent of $50, I can assure you that many will become believers. Of course, getting Libra could be as simple as connecting your local Naira bank account to the Calibra wallet.
From the aggregation-integration construct, Facebook will control the users in Nigeria while the banks and some fintechs will become suppliers. Yes, Facebook Calibra stays at the edges of the smiling curve while others work at the center on the Libra project. In this world of blockchain, Libra is the genuine digital currency, Bitcoin and cousins will likely focus as store of values because if Libra takes off, the winner-takes-all effect will be normalized that even if Bitcoin wants to become a means of exchange later, it will not be accommodated.
Facebook Libra will use amalgam of suppliers like fintech and banks in Nigeria to architect a redesign, where as the super-aggregator controlling the users (i.e. demand, the Nigerians), will execute a framework that will possibly bring many people into quasi financial inclusion, where bank fees could be avoided, and stamp duty fees disintermediated. The Central Bank of Nigeria will win on its financial inclusion target but Nigeria Postal Service (NIPOST) may see its stamp duty fees disappear.
How Facebook Libra Cryptocurrency Will Affect Nigerian Naira, Inflation, Banking
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The financial inclusion swan song in Nigeria is far complicated than what Libra could help, even the CBN still doesn’t know how to go about it; but they keep harping on it…
Libra is more of Facebook than Facebook is Libra, and yet we do not have 50 million Nigerians active on Facebook and its constituents, and we think it has a magic wand to bring those who presently detest banking into the financial system?
Our BVN figures seem to be higher than number of Facebook users in the land. And how many Facebook users don’t have bank account, but still think they need one?
If we are looking for a shortcut to our famed financial inclusion quandary, Libra will still disappoint us.
The challenge before us is beyond flesh and blood; it requires deeper thinking with more nuanced approaches. Our CBN has been doing what has not been working, and they are bold and proud to tell us that they will go on reinforcing and supervising failure for another five years.
Anyway, Facebook can still become the new emperor in the financial space, with its Libra complex…
“Our BVN figures seem to be higher than number of Facebook users in the land. And how many Facebook users don’t have bank account, but still think they need one?” I do think most may in the quest to avoid bank fees may open Facebook for Libra.